KUALA LUMPUR, March 5 (Bernama) — The International Air Transport Association (IATA) has projected revenue losses of between US$63 billion (US$1=RM4.15) and US$113 billion for passenger business globally due to the impact of COVID-19 on the global air transport industry.
It said the global revenue losses were estimated on two possible scenarios; firstly where COVID-19 is contained in current markets with over 100 cases as of March 2, and secondly in the event of a broader spreading of the outbreak.
IATA’s director-general and chief executive officer Alexandre de Juniac said many airlines were cutting capacity and taking emergency measures to reduce costs.
“Governments must take note. Airlines are doing their best to stay afloat as they perform the vital task of linking the world’s economies. As governments look to stimulus measures, the airline industry will need consideration for relief on taxes, charges, and slot allocation,” he said in a statement today.
“The turn of events as a result of COVID-19 is almost without precedent as in little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse.
“It is unclear how the virus will develop, but whether we see the impact contained to a few markets and a US$63 billion revenue loss, or a broader impact leading to a US$113 billion loss of revenue, this is a crisis,” de Juniac said.
In the scenario of limited COVID-19 spread, markets including those with more than 100 cases confirmed as of March 2, have experienced a sharp downturn followed by a V-shaped recovery profile.
The analysis also estimates falls in consumer confidence in other markets in North America, Asia Pacific and Europe.
Globally, the fall in demand translates to an 11 per cent worldwide passenger revenue loss equal to US$63 billion, out of which China would account for some US$22 billion.
Markets associated with Asia, including China, would account for US$47 billion of this total.
If a similar methodology is applied to all markets that currently have 10 or more confirmed COVID-19 cases as of March 2, the outcome is a 19 per cent loss in worldwide passenger revenues, which equates to US$113 billion.
Financially, that would be on a scale equivalent to what the aviation industry experienced in the global financial crisis.
The financial markets have reacted strongly to the spread of COVID-19 as airline share prices have fallen nearly 25 per cent since the outbreak began, some 21 percentage points greater than the decline that occurred at a similar point during the Severe Acute Respiratory Syndrome (SARS) crisis of 2003.
“To a large extent, this fall already prices in a shock to industry revenues much greater than our previous analysis,” IATA said.
IATA’s previous analysis issued on Feb 20, 2020 put lost revenues at US$29.3 billion based on a scenario that would see the impact of COVID-19 largely confined to markets associated with China.
Since that time, the virus has spread to over 80 countries and forward bookings have been severely impacted on routes beyond China.
No estimates are yet available for the impact on cargo operations.